West Australian consumer confidence

dropped slightly in the December quarter,

breaking the five-year high hot-streak

achieved throughout 2018. This is

predominantly on the back of surging petrol

prices, announcements of tighter lending

conditions and rising mortgage interest

rates, political instability and mounting

household budgetary pressures.

Economic recovery is however

continuing and West Australians remain

markedly optimistic compared to previous

quarters, with the Consumer Confidence

Index continuing to trend well above its

long-term average.

As the only survey of its kind in WA,

the Chamber of Commerce and Industry

WA’s (CCIWA) Consumer Confidence Survey canvasses the views of West

Australians across metropolitan Perth

and regional WA to gather evidence on

consumer confidence in the economy,

personal finances and employment

prospects for the near future. The survey

also investigates consumers’ spending

habits and financial health to gain insight

into factors that may influence confidence.

The results for the December quarter

December Quarter 2018

1300 4 CCIWA

economics@cciwa.com

CCI SURVEY:Consumer Confidence

SUBDUED FESTIVE CHEER

80

85

90

95

100

105

110

115

120

125

80

85

90

95

100

105

110

115

120

125

2013 2014 2015 2016 2017 2018

CONSUMER CONFIDENCEWA Economic Conditions

Short-Term (3 Months) Medium-Term (12 Months)

Index: 2016/17 Average = 100

0% 20% 40% 60% 80% 100%

Mar 18

Jun 18

Sep 18

Dec 18

CONSUMER CONFIDENCEShort-Term (3 Months)

Stronger About the same Weaker

STRAINED HOUSEHOLD BUDGETS HAVE ALSO BEEN EXACERBATED BY SLUGGISH WAGE GROWTH AND RISING MORTGAGE INTEREST RATES

indicate that economic recovery in WA is

underway and is consistent with the notion

that the WA community is less pessimistic

about the economic outlook than previously:

• The Short-Term Index (3-month outlook)

declined by 1.6 index points since last

quarter to 114.9 but remains 6.1 index

points higher than December 2017;

• Four out of five consumers (82%) are

anticipating the WA economy to improve

or remain unchanged over the next

quarter, down 2 per cent since last

quarter, including 24% that expect it to

improve;

• The Medium-Term Index (12-month

outlook) declined by 2.4 index points

since last quarter to 116.3, but is

trending 12.5 index points above its

long-term average;

• Despite the modest decline in the index,

there are still more West Australians

that believe the economy will be

stronger (42%) rather than weaker

(19%) in twelve months’ time – the

highest proportion since February 2013.

JOB PROSPECTS AND PERSONAL FINANCES

WA consumers continue to have significant

concerns about their personal finances,

with a greater proportion of consumers

stating that their personal financial situation

has worsened (30%) rather than improved

(24%) since the previous year.

One explanation for the 3.5 index point

decline in the Personal Finances Index

could be the surge in petrol prices in

October – average fuel prices (ULP) in

the Perth metropolitan region soared to

157.4 cents per litre earlier this quarter,

the highest monthly average in over

ten years [FuelWatch, 2018]. Strained

household budgets have also been

exacerbated by sluggish wage growth

and rising mortgage interest rates, with

three of the four major banks lifting their

standard variable mortgage rates by

14-16 basis points earlier this quarter.

Lower income households (with annual

household income below $50,000) are

feeling the pinch with 44 per cent of these

consumers reporting that their financial

position has worsened – almost double the

proportion of higher-income earners (21%).

The Job Prospects Index also declined

marginally by 1.6 index points since last

quarter to 105.3. This modest decrease

in the index can be attributed to a 2 per

cent rise in consumers feeling their job

prospects have worsened rather than

remaining unchanged. However, 15 per cent

of consumers reported improved perceived

employment prospects – the highest

proportion since September 2015.

WHAT IS INFLUENCING CONSUMER CONFIDENCE?

Positive economic news, relatively

subdued interest rates and minimal

inflationary pressures continue to boost

confidence, while WA consumers remain

increasingly cautious about increased

cost of living pressures, slow wages

growth and high household debt.

Cost of living continues to be the biggest

dampener on consumer confidence,

with three out of five consumers (60%)

considering living costs such as transport,

groceries and utilities as having a negative

influence on confidence – unchanged

90.0

95.0

100.0

105.0

110.0

115.0

120.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

2013 2014 2015 2016 2017 2018

PERSONAL FINANCES AND JOB PROSPECTS INDEXViews on personal finance and job prospects compared to a year earlier

Personal FinanceJob Prospects

Index: 2016/17 Average = 100

0% 20% 40% 60% 80% 100%

2018

WHAT A DIFFERENCE A DAY (OR THREE YEARS) MADEMedium-Term Consumer Confidence (12 Months Ahead)

Stronger About the same Weaker

December2015

December2018

since last quarter. The majority across

every demographic in WA – age, gender,

location, household size and income –

indicated that they considered living costs

to detract from their confidence.

Stability in the domestic economy is

continuing to have an encouraging effect,

with more than half of surveyed consumers

(57%) rating domestic economic news

as having a positive or neutral effect on

confidence. Improvements in WA’s labour

market is a likely contributor to this boost

in confidence as full-time employment in

WA has grown to its highest level in three

years and the unemployment rate dropped

to a year-long low earlier this quarter [ABS,

2018]. Job vacancies in WA have also

risen 9.4 per cent over the year to 16,100

advertised vacancies [Department of Jobs

and Small Business, 2018].

The shocks following the Federal leadership

spill continue to be felt within the

community, with two out of five consumers

(43%) feeling that the Federal Government

detracted from their confidence in the

economy, compared to 29 per cent who

reported perceiving the economy positively

thanks to the Government’s activities.

The net positive effect of low interest rates

on confidence has continued to decline

over the last three editions of the Consumer Confidence Survey, with a greater

proportion considering interest rates to have

a negative influence on confidence (33%)

rather than a positive one (26%). Greater

speculation on the timing, direction and

magnitude of the next interest rate change

is increasing uncertainty among consumers

and thus detracting from confidence.

CONFIDENCE AND DOLLAR SPEND

Stabilised consumer confidence is unlikely

to result in a spending spree just yet.

Three out of five consumers (60%) believe

that it is unlikely they will be making any

major household purchases next quarter.

However, this is down 3 per cent since last

quarter and 8 per cent since the beginning

of the year. This indicates that there is

some reduction in aversion to significant

purchases, but this has yet to be fully

translated into an increase in spending

intent. Consumers are becoming slightly

less aversive to the notion of high cost

household goods, which will be positive

news for WA’s struggling retail trade sector.

WHAT ABOUR OUR FINANCIAL HEALTH?

Monitoring financial stress acts as a barometer on the financial stability of an economy.

To identify financial stress within the community, consumers were asked if they had experienced hardship that may hinder their confidence. For instance, if they were unable to pay their bills on time or if their expenses regularly outnumbered their income. While these indicators cannot identify whether financial stress has been impacted by personal spending choices, it can highlight trends in consumer behaviour and macroeconomic stability.

Since the last quarter, there has been a significant increase in the proportion of consumers unable to pay their bills on time, up 5 per cent, which has been somewhat counteracted by a decrease in those unable to pay off their credit or debit card in full, down 6 per cent.

One in three consumers (35%) exceeded their monthly incomes and 16 per cent had to borrow money from friends or family. Indicators of financial stress are apparent in young people – over 32 per cent of consumers aged 18-39 years reported having to borrow money from friends or family, compared to 5 per cent of consumers aged over 40 years.

Given minimal inflationary pressures and the 28-month streak of record low interest rates, these trends in financial stress are concerning but somewhat explain the disconnect in confidence and low spending growth.

Likely22%

Neutral17%

Unlikely60%

LIKELIHOOD OF MAKING MAJOR HOUSEHOLD PURCHASES

Global Economic News

Domestic Economic News

Interest Rates

Personal Finances

Personal Employment

Living Costs

State GovernmentFederal

Government

WHAT INFLUENCES CONSUMERS?STRONG INFLUENCE

WEAK INFLUENCE

NEGATIVEEFFECT

POSITIVEEFFECT

THREE OUT OF FIVE CONSUMERS (60%) BELIEVE THAT IT IS UNLIKELY THEY WILL BE MAKING ANY MAJOR HOUSEHOLD PURCHASES NEXT QUARTER

CONSUMER CONFIDENCE CURRENT QUARTER PREVIOUS QUARTER HIGHEST SINCE

Short-term 114.9 116.5 September 2018

Medium-term 116.3 118.7 September 2018

Note: Index figures may have changed from previous editions of Consumer Confidence due to changes in index calculation methodology. Percentage figures may not always add to 100% due to rounding errors.

The index is rebased to the average score of respondents to the 2016-17 financial year. The value of the index can be interpreted as the percentage change in average consumer confidence in a period compared with the average consumer confidence in 2016-17. For instance, the Consumer Confidence Index in December 2018 is 114.9, which suggests that the average score of survey respondents for consumer confidence in December 2018 is 14.9 per cent higher than the average rating in 2016-17.

60% CONSIDER

LIVING COSTS TO HAVE A

NEGATIVE INFLUENCE ON CONFIDENCE

ENCOURAGINGLY,

43% OF

CONSUMERS

REPORTED

EXPERIENCING

NONE OF THESE

15% COULD NOT PAY

OFF THEIR CREDIT CARD BILL

INDICATORS OF FINANCIAL STRESS Over the last three months

WHAT DOES THIS MEAN FOR WA?

Despite uncertainty surrounding personal finances and job prospects, WA consumers remain upbeat about the economy’s prospects compared to last year. Confidence has somewhat declined since the five-year high recorded last quarter but remains well-above the long-term average. Consumers remain cautious about opening their wallets and increasing their spending patterns, while concerns around financial health remain elevated. Steady wages growth and some relief in costs of living should see consumer confidence bounce back.

35% SPENT MORE

THAN THEY EARNED

1 OUT OF 5 COULDN’T PAY THEIR

BILLS ON TIME

1 OUT OF 3 YOUNG PEOPLE

(AGED 18-39) HAD TO

BORROW MONEY FROM

FRIENDS OR FAMILY

ARE UNLIKELY TO MAKE

MAJOR HOUSEHOLD PURCHASES IN THE

NEXT QUARTER

3 OUT OF 5 CONSUMERS

CONSUMER

CONFIDENCE INDEX

TRENDING ABOVE ITS

5-YEAR

AVERAGE

MORE WEST

AUSTRALIANS

BELIEVE

THE

ECONOMY

IS

STRONGER THAN WEAKER

PERSONAL FINANCES INDEX

DOWN 3.5 POINTS SINCE LAST QUARTER

15% CONSUMERS

REPORTED IMPROVED JOB PROSPECTS

HIGHEST SINCE SEPTEMBER 2015